Top Restaurant Short-Squeeze Plays

Updated from 9:15 a.m. EDT

One industry recently exhibiting a lot heavy short interest is the restaurant group. These stocks have been viewed negatively due to the high cost of commodities, especially in corn-based products due to the extensive production of ethanol.

On the plus side, this trend creates some interesting potential short-squeeze opportunities. A short squeeze takes place when a stock's short-sellers are forced to cover their bearish positions quickly as a stock's price rises on positive news. This short-covering, in turn, drives the price of the stock even higher.

The ratio for measuring a short-squeeze play is the short ratio, which represents the number of days it would take a stock's short-sellers to cover their positions based on the stock's recent daily average trading volume.

Stockpickr has come up with the Top Restaurant Short-Squeeze Plays, a list of heavily shorted stocks in the sector that could rise quickly on any positive catalyst.

One of the stocks in the group with a high short ratio is PF Chang's China Bistro PFCB, which has a short ratio of 18. This owner and operator of P.F. Chang's China Bistro and Pei Wei Asian Diner restaurants just raised its full-year earnings forecast. Despite a decline in first-quarter earnings, results still beat Wall Street expectations. The stock has a price-to-earnings ratio (P/E) of 25 and a P/E-to-growth (PEG) ratio of 1.3.

PF Chang's stock is owned by the First American Small-Cap Select Fund, a five-star Morningstar-rated fund managed by Allen Steinkopf. The fund also holds shares of Helix Energy Solutions HLX, which has a short ratio of 3.6, WMS Industries WMS, which has a short ratio of 4.6, and SonoSite SONO, which has a short ratio of 17.